ECON FINAL
Price / / | X- / | / / | / / | Y- / | / / |______S1/________S2/_________ Quantity 1. A decrease in supply is depicted by a: A) move from point x to point y. B) shift from S1 to S2. C) shift from S2 to S1. D) move from point y to point x. 2. An increase in quantity supplied (as distinct from an increase in supply) is depicted by a: A) move from point y to point x. B) shift from S1 to S2. C) shift from S2 to S1. D) move from point x to point y.
1. C 2. A
Price \ \ | -X \ | \ \ | \ \ | -Y \ | \ \ |__________\D1_____ ___\D2____ Quantity 1. A decrease in demand is depicted by a: A) move from point x to point y. B) shift from D1 to D2. C) shift from D2 to D1. D) move from point y to point x. 2. A decrease in quantity demanded (as distinct from a decrease in demand) is depicted by a: A) move from point x to point y. B) shift from D1 to D2. C) shift from D2 to D1. D) move from point y to point x.
1. C 2. D
Production possibilities (alternatives) A B C D E F Capital goods 5 4 3 2 1 0 Consumer goods 0 5 9 12 14 15 1. Refer to the above table.If the economy is producing at production alternative C, the opportunity cost of the tenth unit of consumer goods will be: A) 4 units of capital goods. B) 2 units of capital goods. C) 3 units of capital goods. D) 1/3 of a unit of capital goods. 2. Refer to the above table. As compared to production alternative D, the choice of alternative C would: A) tend to generate a more rapid growth. B) be unattainable. C) entail unemployment. D) tend to generate a slower growth rate. 3. Refer to the above table. A total output of 3 units of capital goods and 4 units of consumer goods: A) is irrelevant because the economy is capable of producing a larger total output. B) will result in the maximum rate of growth available to this economy. C) would involve an inefficient use of the economy's scarce resources. D) is unobtainable in this economy. 4. Refer to the above table. For this economy to produce a total output of 3 units of capital goods and 13 units of consumer goods it must: A) achieve economic growth. B) use its resources more efficiently than the data in the table now indicate. C) allocate its available resources most efficiently among alternative uses. D) achieve the full employment of available resources. 5. Refer to the above table. For these data the law of increasing opportunity costs is reflected in the fact that: A) the amount of consumer goods that must be sacrificed to get more capital goods diminishes beyond a point. B) larger and larger amounts of capital goods must be sacrificed to get additional units of consumer goods. C) the production possibilities data would graph as a straight downsloping line. D) the economy's resources are presumed to be scarce.
1. D 2. A 3. C 4. A 5. B
A $70 price tag on a sweater in a department store window is an example of money functioning as a: A) unit of account. B) standard of deferred payments. C) store of value. D) medium of exchange.
A
A nation will neither export nor import a specific product when its: A) domestic price (no-international-trade price) equals the world price. B) export supply curve lies above its import demand curve. C) export supply curve is upsloping. D) import demand curve is downsloping.
A
A nation's gross domestic product (GDP): A) can be found by summing C+Ig+G+Xn. B) is the dollar value of the total output produced by its citizens, regardless of where they are living. C) can be found by summing C+S+G+Xn. D) is always some amount less than its NDP.
A
A nation's gross domestic product (GDP): A) is the dollar value of the total output produced within the borders of the nation. B) is the dollar value of the total output produced by its citizens, regardless of where they are living. C) can be found by summing C+In +S+Xn. D) is always some amount less than its C+Ig +G+Xn.
A
A production possibilities curve illustrates: A) scarcity. B) market prices. C) consumer preferences. D) the distribution of income.
A
ATMs and human bank tellers: A) are substitute resources. B) are capital goods. C) have both declined in number because of bank mergers. D) are complementary resources.
A
An increase in personal taxes will shift: A) both the consumption and saving schedules downward. B) both the consumption and saving schedules upward. C) the consumption schedule upward and the saving schedule downward. D) the consumption schedule downward and the saving schedule upward.
A
Assume that a change in government policy results in greater production of both consumer goods and investment goods. We can conclude that: A) the economy was suffering from unemployment and/or the inefficient use of resources before the policy change. B) the economy's production possibilities curve has been shifted to the left as a result of the policy decision. C) this economy's production possibilities curve is convex (bowed inward) to the origin. D) the law of increasing opportunity costs does not apply in this society.
A
Assume the demand curve for product X shifts to the right. This might be caused by: A) a decline in income if X is an inferior good. B) a decline in the price of Z if X and Z are substitute goods. C) a change in consumer tastes that is unfavorable to X. D) an increase in the price of Y if X and Y are complementary goods.
A
Efficiency wages are: A) above-market-wages that bring forth so much added work effort that per-unit production costs are lower than at market wages. B) wage payments necessary to compensate workers for unpleasant or risky work conditions. C) usually less than market wages. D) relevant to macroeconomics because they explain rightward shifts in aggregate demand.
A
Human capital is best defined as: A) the productive skills and knowledge that workers acquire from education and training. B) the substitution of labor for machinery in the production process. C) any piece of machinery that must be combined with labor to be productive. D) the exchange of money for real assets.
A
If government uses fiscal policy to restrain cost-push inflation, we can expect: A) the unemployment rate to rise. B) the unemployment rate to fall. C) the aggregate demand curve to shift rightward. D) tax-rate declines and increases in government spending.
A
If the Consumer Price index rises from 300 to 333 in a particular year, the rate of inflation in that year is: A) 11 percent. B) 33 percent. C) 91 percent. D) 10 percent.
A
If the demand for a normal good (for example, steak) shifts to the left, the most likely reason is that: A) consumer incomes have fallen. B) cattle production has declined. C) the price of steak has risen. D) the price of cattle feed has gone up.
A
If the production possibilities curve were a straight downsloping line, this would suggest that: A) resources are perfectly shiftable between the production of these two goods. B) it is possible to produce more of both products. C) both products are equally capable of satisfying consumer wants. D) the two products have identical prices.
A
Import quotas are: A) maximum limits on the quantity or total value of specific products imported to a nation. B) excise taxes or duties placed on imported products. C) licensing requirements, unreasonable quality standards, and the like designed to impede imports. D) government payments to domestic producers to reduce the world prices of exported goods.
A
In drawing the production possibilities curve we assume that: A) technology is fixed. B) unemployment exists. C) economic resources are unlimited. D) wants are limited.
A
In moving along a stable demand curve which of the following is not held constant? A) the price of the product for which the demand curve is relevant B) price expectations C) consumer incomes D) the prices of complementary goods
A
In terms of aggregate supply, a period in which nominal wages and other resource prices are fully responsive to price-level changes is called the: A) long run. B) short run. C) immediate market period. D) very long run.
A
In the equation of exchange the level of aggregate expenditures is indicated by: A) MV. B) MV/Q. C) PM. D) MV/P.
A
In the long run, demand-pull inflation is best shown as: A) a shift of aggregate demand from AD1 to AD2 followed by a shift of aggregate supply from AS1 to AS2. B) a move from d to b to a. C) a shift of aggregate supply from AS1 to AS2 followed by a shift of aggregate demand from AD1 to AD2. D) a move from a to d.
A
In the real world, specialization is rarely complete because: A) nations normally experience increasing opportunity costs in producing more of the product in which they are specializing. B) production possibilities curves are straight lines rather than curves bowed outward as viewed from the origin. C) one nation's imports are necessarily another nation's exports. D) international law prohibits monopolies.
A
Macroeconomics approaches the study of economics from the viewpoint of: A) the entire economy. B) governmental units. C) the operation of specific product and resource markets. D) individual firms.
A
Money is not an economic resource because: A) money, as such, is not productive. B) idle money balances do not earn interest income. C) the terms of trade can be determined in nonmonetary terms. D) money is not a free gift of nature.
A
One of the strengths of monetary policy relative to fiscal policy is that monetary policy: A) can be implemented more quickly. B) is subject to closer political scrutiny. C) does not produce a net export effect. D) entails a larger spending income multiplier effect on real GDP.
A
Other things equal, a depreciation of the U.S. dollar would: A) increase the price of imported resources and decrease aggregate supply. B) decrease net exports and aggregate demand. C) increase consumption, investment, net export, and government spending. D) decrease aggregate supply and decrease aggregate demand.
A
Stagflation refers to: A) an increase in inflation accompanied by decreases in real output and employment. B) a decline in the price level accompanied by increases in real output and employment. C) a simultaneous increase in real output and the price level. D) a simultaneous reduction in real output and the price level.
A
Suppose that in an economy with a MPC of .8 the government wanted to shift the aggregate demand curve leftward by $40 billion at each price level to remedy demand-pull inflation. It could: A) increase taxes by $10 billion. B) reduce government spending by $40 billion. C)reduce government spending by $5 billion. D) increase taxes by $20 billion.
A
The GDP is the: A) monetary value of all final goods and services produced within a nation in a particular year. B) national income minus all nonincome charges against output. C) monetary value of all economic resources used in producing a year's output. D) monetary value of all goods and services, final and intermediate, produced in a specific year.
A
The basic equation of monetarism is: A) MV=PQ. B) Sa +T+M=Ig +G+Xn C) V=M/PQ. D) Ca +Ig +Xn +G=GDP.
A
The basic problem portrayed by the traditional Phillips Curve is: A) that a level of aggregate demand sufficiently high to result in full employment may also cause inflation. B) that changes in the composition of total labor demand tend to be deflationary. C) that unemployment rises at the same time the general price level is rising. D) the possibility that automation will increase the level of noncyclical unemployment.
A
The crowding-out effect of expansionary fiscal policy suggests that: A) government spending is increasing at the expense of private investment. B) imports are replacing domestic production. C) private investment is increasing at the expense of government spending. D) saving is increasing at the expense of investment.
A
The investment demand curve will shift to the left as a result of: A) an increase in the excess production capacity available in industry. B) a decrease in business taxes. C) increased business optimism with respect to future economic conditions. D) a decrease in labor costs.
A
The law of demand states that: A) price and quantity demanded are inversely related. B) the larger the number of buyers in a market, the lower will be product price. C) price and quantity demanded are directly related. D) consumers will buy more of a product at high prices than at low prices.
A
The law of increasing opportunity costs exists because: A) resources are not equally efficient in producing various goods. B) the value of the dollar has diminished historically because of persistent inflation. C) wage rates invariably rise as the economy approaches full employment. D) consumers tend to value any good more highly when they have little of it.
A
The law of increasing opportunity costs states that: A) if society wants to produce more of a particular good, it must sacrifice larger and larger amounts of other goods to do so. B) the sum of the costs of producing a particular good cannot rise above the current market price of that good. C) if the sum of the costs of producing a particular good rises by a specified percent, the price of that good must rise by a greater relative amount. D) if the prices of all there sources used to produce goods increase, the cost of producing any particular good will increase at the same rate.
A
The law of supply indicates that: A) producers will offer more of a product at high prices than they will at low prices. B) the product supply curve is downsloping. C) consumers will purchase less of a good at high prices than they will at low prices. D) producers will offer more of a product at low prices than they will at high prices.
A
The law of supply: A) reflects the amounts that producers will want to offer at each price in a series of prices. B) is reflected in a downsloping supply curve. C) shows that the relationship between producer revenue and quantity supplied is negative. D) reflects the income and substitution effects of a price change.
A
The location of the product supply curve depends on: A) production technology. B) the number of buyers in the market. C) the tastes of buyers. D) the location of the demand curve.
A
The money supply is backed: A) by the government's ability to control the supply of money and therefore to keep its value relatively stable. B) by government bonds. C) dollar-for-dollar with gold and silver. D) dollar-for-dollar with gold bullion.
A
The physical export of motorcycles or DVD players from the United States to Mexico best illustrates a: A) trade flow. B) resource flow. C) financial flow. D) technology flow.
A
The production possibilities curve shows: A) the various combinations of two goods that can be produced when society uses its scarce resources efficiently. B) the minimum outputs of two goods that will sustain a society. C) the various combinations of two goods that can be produced when some resources are unemployed. D) the ideal, but unattainable, combinations of two goods that would maximize consumer satisfactions.
A
The real-balances, interest-rate, and foreign purchases effects all help explain: A) why the aggregate demand curve is downsloping. B) why the aggregate supply curve is upsloping. C) shifts in the aggregate demand curve. D) shifts in the aggregate supply curve.
A
When an economist says that the demand for a product has increased, this means that: A) consumers are now willing to purchase more of this product at each possible price. B) the product has become particularly scarce for some reason. C) product price has fallen and as a consequence consumers are buying a larger quantity of the product. D) the demand curve has shifted to the left.
A
Which of the following is a labor resource? A) a computer programmer B) a computer C) silicon (sand) used to make computer chips D) a piece of software used by a firm
A
Which of the following is a tenet of supply-side economics? A) High marginal tax rates severely discourage work, saving, and investment. B) Increases in social security taxes and other business taxes shift the aggregate supply curve to the right. C) The Federal Reserve should adhere to a monetary rule that limits increases in the money supply to a 5 percent annual rate. D) Transfer payments increase incentives to work.
A
Which of the following is a tool of monetary policy? A) open market operations B) changes in banking laws C) changes in tax rates D) changes in government spending
A
Which of the following is the largest contribution to the growth of labor productivity in the United States? A) technological advance B) education and training of labor C) economies of scale D) improved resource allocation
A
Which of the following most closely relates to the idea of opportunity costs? A) tradeoffs B) economic growth C) technological change D) capitalism
A
With a downsloping demand curve and an upsloping supply curve for a product, an increase in consumer income will: A) increase equilibrium price and quantity if the product is a normal good. B) decrease equilibrium price and quantity if the product is a normal good. C) have no effect on equilibrium price and quantity. D) reduce the quantity demanded, but not shift the demand curve.
A
A demand curve: A) shows the relationship between price and quantity supplied. B) indicates the quantity demanded at each price in a series of prices. C) graphs as an upsloping line. D) shows the relationship between income and spending.
B
A government subsidy to the producers of a product: A) reduces product supply. B) increases product supply. C) reduces product demand. D) increases product demand.
B
A recent study found that an increase in the Federal tax on beer (and thus an increase in the price of beer) would reduce the demand for marijuana. We can conclude that: A) beer and marijuana are substitute goods. B) beer and marijuana are complementary goods. C) beer is an inferior good. D) marijuana is an inferior good.
B
According to the adherents of the New Economy view, the above-normal economic growth in the United States between 1995 and 2002 was caused by: A) increases in the rate of personal saving. B) increased entrepreneurial activity, application of information technology, and global competition. C) rising Federal budget surpluses that reduced real interest rates. D) expansionary monetary policy.
B
An increase in demand means that: A) given supply, the price of the product will decline. B) the demand curve has shifted to the right. C) price has declined and consumers therefore want to purchase more of the product. D) the demand curve has shifted to the left.
B
Assume that Hernandez is temporarily unemployed because he has voluntarily quit his job with company A and will begin a better job next week with company B. Hernandez will be considered as: A) cyclically unemployed. B) frictionally unemployed. C) secularly unemployed. D) employed.
B
Assume the consumption schedule for a private closed economy is C = 40 + 0.75Y, where C is consumption and Y is gross domestic product. The multiplier for this economy is: A) 3. B)4. C)5. D)10.
B
Assume the natural rate of unemployment in the U.S. economy is 5 percent and the actual rate of unemployment is 9 percent. According to Okun's law, the negative GDP gap as a percent of potential GDP is: A) 4 percent. B) 8 percent. C) 10 percent. D) 2 percent.
B
Consumer demand for DVDs has increased over time because the price of DVD players has: A) decreased, and DVD players and video cassette players are substitute goods. B) decreased, and DVD players and video cassette players are complementary goods. C) increased, and DVD players and video cassette players are substitute goods. D) increased, and DVD players and video cassette players are complementary goods.
B
Critics of supply-side economics: A) argue that a tax cut will increase aggregate supply by more than it increases aggregate demand. B) contend that the relationship between tax rates and economic incentives is small and of uncertain direction. C) believe that a decline in tax rates will increase tax revenues. D) point out that tax cuts enable households to "buy more leisure" by working less.
B
Growth is advantageous to a nation because it: A) promotes faster population growth. B) lessens the burden of scarcity. C) eliminates the economizing problem. D) slows the growth of wants.
B
If consumers are willing to pay a higher price than previously for each level of output, we can say that the following has occurred: A) a decrease in demand. B) an increase in demand. C) a decrease in supply. D) an increase in supply.
B
If government adhered strictly to an annually balanced budget, the government's budget would: A) reduce the size of the public debt. B) intensify the business cycle. C) have no impact on real GDP. D) stabilize the economy.
B
If steak is a normal good and its price rises: A) the amount purchased may either increase or decrease depending on the relative importance of the income and substitution effects. B) both the income and substitution effects suggest that less will be purchased. C) the substitution effect suggests more will be purchased, but the income effect suggests less will be purchased. D) the income effect suggests more will be purchased, but the substitution effect suggests less will be purchased.
B
If you place a part of your summer earnings in a savings account, you are using money primarily as a: A) medium of exchange. B) store of value. C) unit of account. D) standard of value.
B
In 2003 the price of oil increased, which in turn caused the price of natural gas to rise. This can best be explained by saying that oil and natural gas are: A) complementary goods and the higher price for oil increased the demand for natural gas. B) substitute goods and the higher price for oil increased the demand for natural gas. C) complementary goods and the higher price for oil decreased the supply of natural gas. D) substitute goods and the higher price for oil decreased the supply of natural gas.
B
In terms of aggregate supply, a period in which nominal wages and other resource prices are unresponsive to price-level changes is called the: A) long run. B) short run. C) immediate market period. D) very long run.
B
In the theory of comparative advantage, a good should be produced in that nation where: A) the production possibilities line lies further to the right than the trading possibilities line. B) its cost is least in terms of alternative goods that might otherwise be produced. C) its absolute cost in terms of real resources used is least. D) its absolute money cost of production is least.
B
Increases in the productivity of labor result partly from: A) the law of diminishing returns. B) improvements in technology. C) reductions in wage rates. D) increases in the quantity of labor.
B
Microeconomics is concerned with: A) the aggregate or total levels of income, employment, and output. B) a detailed examination of specific economic units that make up the economic system. C) positive economics, but not normative economics. D) the establishing of an overall view of the operation of the economic system.
B
Nominal GDP is: A) the sum of all monetary transactions that occur in the economy in a year. B) the sum of all monetary transactions involving final goods and services that occur in the economy in a year. C) the amount of production that occurs when the economy is operating at full employment. D) money GDP adjusted for inflation.
B
Real GDP is: A) the nominal value of all goods and services produced in the economy. B) the nominal value of all goods and services produced in the domestic economy corrected for inflation or deflation. C) that aggregate output that is produced when the economy is operating at full employment. D) always greater than nominal GDP.
B
Suppose an economist says that "Other things equal, the lower the price of bananas, the greater the amount of bananas purchased." This statement indicates that: A) the quantity of bananas purchased determines the price of bananas. B) all factors other than the price of bananas (for example, consumer tastes and incomes) are assumed to be constant. C) economists can conduct controlled laboratory experiments. D) one cannot generalize about the relationship between the price of bananas and the quantity purchased.
B
Suppose the domestic price (no-international-trade price) of wheat is $3.50 a bushel in the United States while the world price is $4.00 a bushel. Assuming no transportation costs, the United States will: A) have a domestic shortage of wheat. B) export wheat. C) import wheat. D) neither export nor import wheat.
B
The Federal funds rate is: A) higher than the prime interest rate. B) lower than the prime interest rate. C) always equal to the Fed's discount rate. D) equal to the prime interest rate minus the Fed's discount rate.
B
The economic perspective entails: A) irrational behavior by individuals and institutions. B) a comparison of marginal benefits and marginal costs in decision making. C) short-term but not long-term thinking. D) rejection of the scientific method.
B
The emigration of software designers from India to the United States or the building of a production in plant in China by an American firm best illustrates a(n): A) trade flow. B) resource flow. C) financial flow. D) information flow.
B
The four factors of production are: A) land, labor, capital, and money B) land, labor, capital, and entrepreneurial ability C)labor, capital, technology, and entrepreneurial ability D) labor, capital, entrepreneurial ability, and money
B
The investment demand curve suggests: A) that changes in the real interest rate will not affect the amount invested. B) there is an inverse relationship between the real rate of interest and the level of investment spending. C) that an increase in business taxes will tend to stimulate investment spending. D) there is a direct relationship between the real rate of interest and the level of investment spending.
B
The invisible hand refers to the: A) fact that the U.S. tax system redistributes income from rich to poor. B) notion that, under competition, decisions motivated by self-interest promote the social interest. C) tendency of monopolistic sellers to raise prices above competitive levels. D) fact that government controls the functioning of the market system.
B
The optimal or allocatively efficient point on a production possibilities curve is achieved where: A) the smallest physical amounts of inputs are used to produce each good. B) each good is produced at a level where marginal benefits equal marginal costs. C) large amounts of capital goods are produced relative to consumer goods. D) large amounts of consumer goods are produced relative to capital goods.
B
The real interest rate is: A) the percentage increase in money that the lender receives on a loan. B) the percentage increase in purchasing power that the lender receives on a loan. C) also called the after-tax interest rate. D) usually higher than the nominal interest rate.
B
The scarcity problem: A) persists only because countries have failed to achieve continuous full employment. B) persists because economic wants exceed available productive resources. C) has been solved in all industrialized nations. D) has been eliminated in affluent societies such as the United States and Canada.
B
The velocity of money is the: A) relationship between the money supply and the price level. B) number of times per year the average dollar is spent on final goods and services. C) relationship between asset and transactions demands for money. D) price level divided by aggregate supply.
B
Transfer payments are: A) excluded when calculating GDP because they only reflect inflation. B) excluded when calculating GDP because they do not reflect current production. C) included when calculating GDP because they are a category of investment spending. D) included when calculating GDP because they increase the spending of recipients.
B
What do wages paid to blue-collar workers, interest paid on a bank loan, forgone interest, and the purchase of component parts have in common? A) None are either implicit or explicit costs. B) All are opportunity costs. C) All are implicit costs. D) All are explicit costs.
B
Which of the following involves the creation of human capital? A) the XYZ Corporation upgrades the machinery on its assembly line B) Jones receives apprenticeship training as a carpenter C) Smith buys 30 shares of common stock D) a retired person decides to reenter the labor force
B
Which of the following is a true statement? A) There is a long-run tradeoff between inflation and unemployment. B) There is no tradeoff between inflation and unemployment in the long run. C) The short-run Phillips Curve is horizontal. D) The long-run Phillips Curve is horizontal.
B
Which of the following represents the most expansionary fiscal policy? A) a $10 billion tax cut B) a $10 billion increase in government spending C) a $10 billion tax increase D) a $10 billion decrease in government spending
B
Which of the following statements is true? A) The process of deriving economic theories and principles is known as policy economics. B) Full employment, price-level stability, and economic growth are widely accepted macroeconomics goals in the United States. C) Normative economics deals with "what is," whereas positive economics deals with "what ought to be." D) There can be too little of a good thing, but never too much of a good thing.
B
Which of the following will not cause the consumption schedule to shift? A) a sharp increase in the amount of wealth held by households B) a change in consumer incomes C) the expectation of a recession D) a growing expectation that consumer durables will be in short supply
B
Which of the following will not tend to shift the consumption schedule upward? A) a currently small stock of durable goods in the possession of consumers B) the expectation of a future decline in the consumer price index C) a currently low level of household debt. D) the expectation of future shortages of essential consumer goods.
B
he market system: A) produces considerable inefficiency in the use of scarce resources. B) effectively harnesses the incentives of workers and entrepreneurs. C) is inconsistent with freedom of choice in the long run. D) has slowly lost ground to emerging command systems.
B
A basic criticism of supply-side economics is that: A) empirical research clearly shows that incentives to work and invest vary directly with marginal tax rates. B) lower taxes will increase aggregate supply much more than they will increase aggregate demand. C) lower taxes will increase aggregate demand much more than they will increase aggregate supply. D) higher taxes will reduce incentives to work, invest, and innovate.
C
A production possibilities curve shows: A) that resources are unlimited. B) that people prefer one of the goods more than the other. C) the maximum amounts of two goods that can be produced assuming the full and efficient use of available resources. D) combinations of capital and labor necessary to produce specific levels of output.
C
A rightward shift of the investment demand curve might be caused by: A) an increase in the price level. B) a decline in the real interest rate. C) an increase in the expected rate of return on investment. D) an increase in business taxes.
C
A shift to the right in the demand curve for product A can be most reasonably explained by saying that: A) consumer incomes have declined and they now want to buy less of A at each possible price. B) the price of A has increased and, as a result, consumers want to purchase less of it. C) consumer preferences have changed in favor of A so that they now want to buy more at each possible price. D) the price of A has declined and, as a result, consumers want to purchase more of it.
C
According to the concept of comparative advantage, a good should be produced in that nation where: A) its domestic opportunity cost is greatest. B) money is used as a medium of exchange. C) its domestic opportunity cost is least. D) the terms of trade are maximized.
C
An increase in consumer incomes will: A) increase the demand for an inferior good. B) increase the supply of an inferior good. C) increase the demand for a normal good. D) decrease the supply of a normal good.
C
Eckstein has lost her job in a Massachusetts textile plant because of import competition. She intends to take a short course in electronics and move to California where she anticipates that a new job will be available. We can say that Eckstein is faced with: A) secular unemployment. B) cyclical unemployment. C) structural unemployment. D) frictional unemployment.
C
Economic Models: A) are of limited use because they cannot be tested empirically. B) are limited to variables that are directly related to one another. C) emphasize basic economic relationships by abstracting from the complexities of the real world. D) are unrealistic and therefore of no practical consequence.
C
Economists regard expenditures on education as investments because: A) they are subject to tax deductions at the same rate as are expenditures on machinery and equipment. B) education is economically beneficial at the same time it is being acquired. C) such expenditures are current costs that are intended to enhance future earnings. D) they differ from expenditures on health and worker mobility.
C
Final goods and services refer to: A) goods and services that are unsold and therefore added to inventories. B) goods and services whose value has been adjusted for changes in the price level. C) goods and services purchased by ultimate users, rather than for resale or further processing. D) the excess of U.S. exports over U.S. imports.
C
Fiscal conservatives favor an annually balanced budget primarily because they: A) believe the private sector is inherently unstable. B) believe the public debt will soon cause the Federal government to go bankrupt. C) believe deficit financing leads to an undesirable expansion of the public sector of the economy. D) fear interest payments on the debt will increase income inequality.
C
If L and M are complementary goods, an increase in the price of L will result in: A) an increase in the sales of L. B) no change in either the price or sales of M. C) a decrease in the sales of M. D) an increase in the sales of M.
C
If actual reserves in the banking system are $50,000, excess reserves are $5,000, and checkable deposits are $225,000, then the monetary multiplier is: A) 10. B)4. C)5. D)10.
C
If producers must obtain higher prices than previously to produce various levels of output, the following has occurred: A) a decrease in demand. B) an increase in demand. C) a decrease in supply. D) an increase in supply.
C
If the equilibrium exchange rate changes so that fewer dollars are needed to buy a South Korean won, then: A) Americans will buy fewer Korean goods and services. B) the won has appreciated in value. C) fewer U.S. goods and services will be demanded by the South Koreans. D) the dollar has depreciated in value.
C
Kimberly voluntarily quit her job as an insurance agent to return to school full-time to earn an MBA degree. With degree in hand she is now searching for a position in management. Kimberly presently is: A) cyclically unemployed. B) structurally unemployed. C) frictionally unemployed. D) not a member of the labor force.
C
Microeconomics: A) is the basis for the "after this, therefore because of this " fallacy. B) is not concerned with details, but only with the overall big picture of the economy. C) is concerned with individual economic units and specific markets. D) describes the aggregate flows of output and income.
C
Other things equal, an increase in productivity will: A) reduce aggregate supply and increase real output. B) reduce both the interest rate and the international value of the dollar. C) increase both aggregate supply and real output. D) increase net exports, increase investment, and reduce aggregate demand.
C
Other things equal, appreciation of the dollar: A) increases aggregate demand in the United States and may increase aggregate supply by reducing the prices of imported resources. B) increases aggregate demand in the United States and may decrease aggregate supply by reducing the prices of imported resources. C) decreases aggregate demand in the United States and may increase aggregate supply by reducing the prices of imported resources. D) decreases aggregate demand in the United States and may reduce aggregate supply by increasing the prices of imported resources.
C
Purchasing common stock by writing a check best exemplifies money serving as a: A) store of value. B) unit of account. C) medium of exchange. D) index of satisfaction.
C
Real GDP and nominal GDP differ because the real GDP: A) is adjusted for changes in the volume of intermediate transactions. B) includes the economic effects of international trade. C) has been adjusted for changes in the price level. D) excludes depreciation charges.
C
Suppose the domestic price (no-international-trade price) of copper is $1.20 a pound in the United States while the world price is $1.00 a pound. Assuming no transportation costs, the United States will: A) have a domestic surplus of copper. B) export copper. C) import copper. D) neither export nor import copper.
C
Suppose the price level is fixed, the MPC is .8, the GDP gap is a negative $200 billion. To achieve full- employment output (exactly), government should: A) increase government expenditures by $200 billion. B) reduce taxes by $200 billion. C) increase government expenditures by $40 billion. D) reduce taxes by $160 billion.
C
The GDP gap measures the difference between: A) NDP and GDP. B) NI and PI. C) actual GDP and potential GDP. D) nominal GDP and real GDP.
C
The achieving of complete economic freedom is most likely to conflict with the goal of: A) price-level stability. B) economic growth. C) an equitable distribution of income. D) economic efficiency.
C
The concept of economic efficiency is primarily concerned with: A) the limited wants-unlimited resources dilemma. B) considerations of equity in the distribution of wealth. C) obtaining the maximum output from available resources. D) the conservation of irreplaceable natural resources.
C
The demand curve shows the relationship between: A) money income and quantity demanded. B) price and production costs. C) price and quantity demanded. D) consumer tastes and the quantity demanded.
C
The economic perspective refers to: A) macro economic phenomena, but not micro economic phenomena. B) microeconomic phenomena, but not macroeconomic phenomena. C) the making of rational decisions in a context of marginal costs and marginal benefits. D) unlimited resources in a context of limited economic wants.
C
The effectiveness of the built-in or automatic stabilizers is limited because: A) the stabilizers produce budget surpluses during recessions. B) transfer payments and subsidies increase during inflation and decrease during recessions. C) the offset the stabilizers provide to a change in private spending is less than the change in private spending. D) the stabilizers raise the general price level regardless of the phase of the business cycle.
C
The equality-efficiency tradeoff refers to: A) the conflict between risk averters and risk takers. B) the willingness of Congress to abandon existing welfare programs in favor of a comprehensive plan to increase education and training for low-income persons. C) possible conflicts between the goals of economic efficiency and greater income equality. D) the difference between the goals of income equality and equality of economic opportunity.
C
The financing of a government deficit increases interest rates and, as a result, reduces investment spending. This statement describes: A) the supply-side effects of fiscal policy. B) built-in stability C) the crowding-out effect. D) the net export effect
C
The fundamental problem of economics is: A) to establish a democratic political framework for the provision of social goods and services. B) the establishment of prices that accurately reflect the relative scarcities of products and resources. C) the scarcity of productive resources relative to economic wants. D) to achieve a more equitable distribution of money income in order to mitigate poverty.
C
The idea of efficiency wages is that: A) the wages of each type of labor must be proportionate to their marginal products. B) the wages of each type of labor must be equal to their marginal products. C) firms might get greater work effort by paying above-equilibrium wage rates. D) workers are more diligent when paid below-equilibrium wages.
C
The interest rate at which the Federal Reserve Banks lend to commercial banks is called the: A) prime rate. B) short-term rate. C) discount rate. D) Federal funds rate.
C
The investment demand curve will shift to the right as a result of: A) an increase in the excess production capacity available in industry. B) an increase in business taxes. C) technological progress. D) an increase in the acquisition and maintenance cost of capital goods.
C
The opportunity cost of holding money: A) is zero because money is not an economic resource. B) varies inversely with the interest rate. C) varies directly with the interest rate. D) varies inversely with the level of economic activity.
C
The problems associated with a growing public debt are modest when compared with the costs entailed by recession and unemployment. This statement reflects the idea of: A) the balanced-budget multiplier. B) the full-employment budget. C) functional finance. D) the crowding-out effect.
C
The production possibilities curve illustrates the basic principle that: A) the production of more of any one good will in time require smaller and smaller sacrifices of other goods. B) an economy will automatically obtain full employment of its resources. C) if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced. D) an economy's capacity to produce increases in proportion to its population size.
C
The spending by Americans while traveling in Europe best illustrates a: A) trade flow. B) labor flow. C) financial flow. D) technology flow.
C
The substitution effect indicates that: A) a decline in money income will cause the consumer to buy more inferior goods and fewer superior goods. B) consumer equilibrium can only be achieved when the consumer is buying substitute goods. C) when the price of a product falls, the lower price will induce the consumer to buy more of that product at the expense of other products. D) when the price of a product falls, a consumer will be able to buy more of it with a specific money income.
C
The term "ceteris paribus" means: A) that if event A precedes event B, A has caused B. B) that economics deals with facts, not values. C) other things equal. D) prosperity inevitably follows recession.
C
The three main tools of monetary policy are: A) tax rate changes, the discount rate, and open-market operations. B) tax rate changes, changes in government expenditures, and open-market operations. C) the discount rate, the reserve ratio, and open-market operations. D) changes in government expenditures, the reserve ratio, and the discount rate.
C
The two basic markets shown by the simple circular flow model are: A) capital goods and consumer goods. B) free and controlled. C) product and resource. D) household and business.
C
The typical production possibilities curve is: A) an upsloping line that is concave to the origin. B) a downsloping line that is convex to the origin. C) a downsloping line that is concave to the origin. D) a straight upsloping line.
C
Value added refers to: A) any increase in GDP that has been adjusted for adverse environmental effects. B) the excess of gross investment over net investment. C) the difference between the value of a firm's output and the value of the inputs it has purchased from others. D) the portion of any increase in GDP that is caused by inflation as opposed to an increase in real output.
C
When the price of oil declines significantly, the price of gasoline also declines. The latter occurs because of a(n): A) increase in the demand for gasoline. B) decrease in the demand for gasoline. C) increase in the supply of gasoline. D) decrease in the supply of gasoline.
C
Which of the following is a land resource? A) a computer programmer B) a computer C) silicon (sand) used to make computer chips D) a piece of software used by a firm
C
Which of the following is a normative statement? A) The temperature is high today. B) The humidity is high today. C) It is too hot to play tennis today. D) It will cool off later this evening.
C
Which of the following is a positive statement? A) The humidity is too high today. B) It is too hot to jog today. C) The temperature is 92 degrees today. D) I enjoy summer evenings when it cools off.
C
Which of the following is an economic explanation for why most college-aged movie stars do not attend college. A) they are too dumb to get into college B) they would find college life boring C) the opportunity cost in terms of reduced income is too great D) they cannot afford the room, board, and tuition fees most colleges charge.
C
Which of the following is an intermediate good? A) the purchase of gasoline for a ski trip to Colorado B) the purchase of a pizza by a college student. C) the purchase of baseball uniforms by a professional baseball team. D) the purchase of jogging shoes by a professor
C
Which of the following statements pertains to macroeconomics? A) Because the minimum wage was raised, Mrs.Olsen decided to enter the labor force. B)A decline in the price of soybeans caused farmer Wanek to plant more land in wheat. C) The national productivity rate grew by 2.7 percent last year. D) The Pumpkin Center State Bank increased its interest rate on consumer loans by 1 percentage point.
C
With respect to the basic economic goals of society, for example, economic growth, full employment, economic efficiency, price level stability, economic freedom, distributional equity, and economic security, it can be said that: A) all are accepted and assigned similar priorities in every industrialized society. B) all are precisely measurable. C) some goals are complementary and others are conflicting. D) all are conflicting goals.
C
A college graduate using the summer following graduation to search for a job would best be classified as: A) not officially a member of the labor force. B) a part of structural unemployment. C) a part of cyclical unemployment. D) a part of frictional unemployment.
D
A major criticism of a cyclically balanced budget is that: A) tax revenues automatically fall in recessions, but do not automatically increase in expansions. B) automatic (built-in) stabilizers are so effective that discretionary fiscal policy is unnecessary. C) such a policy has an inflationary bias. D) upswings and downswings of the business cycle are not always of equal magnitude and duration.
D
A normative statement is one that: A) is based on the law of averages. B) applies only to microeconomics. C) applies only to macroeconomics. D) is based on value judgments(what ought to be).
D
A positive statement is one which is: A) derived by induction. B) derived by deduction. C) subjective and is based on a value judgment. D) objective and is based on facts (what is).
D
An appropriate fiscal policy for severe demand-pull inflation is: A) an increase in government spending. B) depreciation of the dollar. C) a reduction in interest rates. D) a tax rate increase.
D
Any point inside the production possibilities curve indicates: A) the realization of allocative efficiency. B) that resources are imperfectly shiftable among alternative uses. C) the presence of inflationary pressures. D) that more output could be produced with available resources.
D
Economic resources are also called: A) free gifts of nature. B) consumption goods. C) units of money capital. D) factors of production.
D
Free trade based on comparative advantage is economically beneficial because: A) it promotes an efficient allocation of world resources. B) it increases competition. C) it provides consumers with a wider range of products. D) all of the above reasons.
D
Functional finance contends that: A) the Federal budget should be balanced, not annually, but rather over the business cycle. B) the Federal budget should be used primarily to alter the allocation of resources and not to stabilize the economy. C) automatic stabilizers are so effective that discretionary fiscal policy is unnecessary. D) the primary purpose of the Federal budget is to stabilize the economy and balancing the budget as such is of far lesser importance.
D
GDP includes: A) neither intermediate nor final goods. B) both intermediate and final goods. C) intermediate, but not final, goods. D) final, but not intermediate, goods.
D
If X is a normal good, a rise in money income will shift the: A) supply curve for X to the left. B) supply curve for X to the right. C) demand curve for X to the left. D) demand curve for X to the right.
D
If Z is an inferior good, a decrease in money income will shift the: A) supply curve for Z to the left. B) supply curve for Z to the right. C) demand curve for Z to the left. D) demand curve for Z to the right.
D
If firms are paying efficiency wages, they: A) may be reluctant to increase nominal wages when aggregate demand increases. B) are highly vulnerable to import competition. C) may be targeted for takeover by firms paying market wages. D) may be reluctant to cut wages when aggregate demand declines.
D
If resources A and B are complementary and employed in fixed proportions: A) a change in the price of A will have no effect on the quantity of B employed. B) an increase in the price of A may either increase or decrease the demand for B. C) an increase in the price of A will increase the demand for B. D) an increase in the price of A will decrease the demand for B.
D
If the demand curve for product B shifts to the right as the price of product A declines, then: A) both A and B are inferior goods. B) A is a superior good and B is an inferior good. C) A is an inferior good and B is a superior good. D) A and B are complementary goods.
D
In terms of aggregate supply, the difference between the long run and the short run is that in the long run: A) the price level is variable. B) employment is variable. C) real output is variable. D) nominal wages and other input prices are fully responsive to price-level changes.
D
In terms of aggregate supply, the short run is a period in which: A) the price level is constant. B) employment is constant. C) real output is constant. D) nominal wages and other resource prices are unresponsive to price-level changes.
D
Money functions as: A) a store of value. B) a unit of account. C) a medium of exchange. D) all of the above.
D
One implication of efficiency wages is that: A) labor turnover is reduced as wages are reduced. B) the market-clearing wage always exceeds the efficiency wage. C) worker productivity falls as wage rates rise beyond the equilibrium wage. D) if the efficiency wage exceeds the market-clearing wage, permanent unemployment may result.
D
Opportunity cost is best defined as: A) the monetary price of any productive resource. B) the amount of labor that must be used to produce one unit of any product. C) the ratio of the prices of imported goods to the prices of exported goods. D) the amount of one product that must be given up to produce one more unit of another product.
D
SouthCantina Production Possibilities A B C D E F Capital goods 5 4 3 2 1 0 Consumer goods 0 8 15 21 25 27 Refer to the above tables. If South Cantina is producing at production alternative D, the opportunity cost of the third unit of capital goods will be: A) 3 units of consumer goods. B) 4 units of consumer goods. C) 5 units of consumer goods. D) 6 units of consumer goods.
D
Structural unemployment: A) is also known as frictional unemployment. B) is the main component of cyclical unemployment. C) is said to occur when people are waiting to be called back to previous jobs. D) may involve a locational mismatch between unemployed workers and job openings.
D
The Fed can change the money supply by: A) changing bank reserves through the sale or purchase of government securities. B) changing the quantities of required and excess reserves by altering the legal reserve ratio. C) changing the discount rate so as to encourage or discourage commercial banks in borrowing from the central banks. D) doing all of the above.
D
The U.S. public debt: A) refers to the debts of all units of government--Federal, state, and local. B) consists of the total debt of U.S. households, businesses, and government. C) refers to the collective amount that U.S. citizens and businesses owe to foreigners. D) consists of the historical accumulation of all Federal government deficits and surpluses.
D
The business-to-business (B2B) retrieval of prices of foreign resources via the Internet best illustrates a(n): A) trade flow. B) capital and labor flow. C) financial flow. D) information flow.
D
The concept of net domestic investment refers to: A) the amount of machinery and equipment used up in producing the GDP in a specific year. B) the difference between the market value and book value of outstanding capital stock. C) gross domestic investment less net exports. D) total investment less the amount of investment goods used up in producing the year's output.
D
The demand curve for a product might shift as the result of a change in: A) consumer tastes. B) consumer incomes. C) the prices of related goods. D) all of the above.
D
The law of increasing opportunity costs: A) applies to land-intensive commodities, but not to labor-intensive or capital-intensive commodities. B) results in straight-line production possibilities curves rather than curves that are bowed outward from the origin. C) refutes the principle of comparative advantage. D) may limit the extent to which a nation specializes in producing a particular product.
D
The location of the supply curve of a product depends on: A) the technology used to produce it. B) the prices of resources used in its production. C) the number of sellers in the market. D) all of the above.
D
The location of the supply curve of a product depends on: A) the technology used to produce it. B) the prices of resources used in its production. C) the number of sellers in the market. D) all of the above.
D
The money payments made to owners of land, labor, capital, and entrepreneurial ability are: A) interest, wages, rent, and profits respectively. B) rent, wages, dividends, and interest respectively. C) rent, profits, wages, and interest respectively. D) rent, wages, interest, and profits respectively.
D
The purchase by an American firm of the right to produce a prescription drug patented in Germany best illustrates a: A) trade flow. B) capital flow. C) goods and services flow. D) technology flow.
D
The rate of inflation can be found by subtracting: A) the real income from the nominal income. B) last year's price index from this year's price index. C) this year's price index from last year's price index and dividing the difference by this year's price index. D) last year's price index from this year's price index and dividing the difference by last year's price index.
D
To increase the Federal funds rate, the Fed can: A) buy government bonds from the public. B) decrease the discount rate. C) decrease the prime interest rate. D) sell government bonds to commercial banks.
D
U.S. export transactions create: A) a U.S. demand for foreign monies and the satisfaction of this demand decreases the supplies of dollars held by foreign banks. B) a U.S. demand for foreign monies and the satisfaction of this demand increases the supplies of dollars held by foreign banks. C) a foreign demand for dollars and the satisfaction of this demand decreases the supplies of foreign monies held by U.S. banks. D) a foreign demand for dollars and the satisfaction of this demand increases the supplies of foreign monies held by U.S. banks.
D
Which of the following is a capital resource? A) a computer programmer B) a corporate bond issued by a computer manufacturer C) silicone (sand) used to make computer chips D) a piece of software used by a firm
D
Which of the following is a land resource? A) a farmer B) an oil drilling rig C) a machine for detecting earthquakes. D) natural gas
D
Which of the following lists includes only capital resources (and therefore no labor or land resources)? A) an ice arena; a professional hockey player; hockey uniforms. B) the owner of a new startup firm; a chemistry lab; a researcher. C) a hydroelectric dam; water behind the dam; power lines. D) autos owned by a car rental firm; computers at the car rental agency; the vans that shuffle rental customers to and from the airport.
D
Which of the following represents the most contractionary fiscal policy? A) a $30 billion tax cut B) a $30 billion increase in government spending C) a $30 billion tax increase D) a $30 billion decrease in government spending
D
